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Chapter 1
Introduction to business logistics
Chapter 11: Strategic Leadership
Introduction to business
logistics
This chapter addresses the following six topics:
• Background to business logistics
• Business logistics in a macroeconomic
perspective
• Evolution of the concept of logistics
• Emergence of logistics in a business context
• The concepts of logistics and supply chain
management
• Business logistics activities
Chapter 11: Strategic Leadership
Background to business
logistics
• Spatial and temporal separation between:
- location of natural resources for production and
- where and when people use and consume products
• Economic development and growth is dependent
upon:
- productive regional specialisation and division of labour
and skills and
- exchange of goods, services and information
• Greater logistics value of road transport leads to
increased use of road over rail.
Chapter 11: Strategic Leadership
Background to business
logistics (continued)
• Regulatory failures (post-late 1970s) often more
damaging than market failures
• Rapid change in economic life (1970s–1980s)
had two main driving forces:
- The emergence of freer competition nationally and
internationally
- Rapid technological advances
• Global competition and sophisticated consumers
led to:
- Competition through logistically arranged product supply
chains, rather than through individual businesses operating
in isolation
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective
GDP of South Africa (2006):
• Transport: R157 million
• Logistics as a proportion of GDP: 14.7%
• USA logistics as a proportion of GDP: 9.9%
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective (continued)
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective (continued)
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective (continued)
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective (continued)
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective (continued)
Chapter 11: Strategic Leadership
Business logistics
in a macroeconomic
perspective (continued)
Chapter 11: Strategic Leadership
Evolution of the concept of
logistics
• Logistics = logistikos (Greek): ‘skilled in
calculating; relating to arithmetic’ or ‘concerned
with reason’
• Logos is translated as ‘reason’, ‘word’ or
‘discourse’
• Logistikos (Greek) = logistique in French (1546)
• Logistique (noun; 1611) referred to adding,
subtracting, multiplying and dividing
Chapter 11: Strategic Leadership
Evolution of the concept of
logistics (continued)
• Logistique (adjective; 1765) means ‘with
reference to calculation’.
• Jomini, ‘Summary of the Art of War’ (1836):
combining and coordinating the quartering, means
of transport and supply and support of troops
through reasoning by calculation during a military
campaign.
Chapter 11: Strategic Leadership
Emergence of logistics in a
business context
• After WW II Western Europe moved from military
to business logistics to rebuild infrastructure based
on Jomini’s legacy of military logistics.
• Experts employed in the post-war revitalisation
used logistics, systems analysis and operations
research.
• To regain economic self-sufficiency primary
production, secondary manufacturing and tertiary
service delivery were required.
• Within the region logistics chains emerged as if
no international borders existed.
Chapter 11: Strategic Leadership
Emergence of logistics in a
business context (continued)
• By 1960, coordinated logistics practice had taken
root; business logistics was in place and
developed.
• The French Academy’s definition of business
logistics: ‘All means and methods of organising a
service, a business and especially the flow of
materials before, during and after production.
• Integrated and coordinated management means
attaining the lowest total process cost, not the
lowest cost of each function in the process.
• Achieving efficient logistics necessitates
systems analysis and operations research.
Chapter 11: Strategic Leadership
Systems analysis
Systems analysis entails seven consecutive steps:
1.
Problem identification
2.
Systems modelling
3.
Generating alternative solutions
4.
Evaluation
5.
System selection
6.
Implementation
7.
Monitoring and review
Chapter 11: Strategic Leadership
Systems analysis and
logistics management
Chapter 11: Strategic Leadership
The concepts of logistics
and supply chain
management
•
Logistics management: ‘That part of supply
chain management that plans, implements
and controls the efficient, effective forward
and reverse flow and storage of goods,
services and related information between the
point of origin and the point of consumption in
order to meet customers’ requirements.’
(CSCMP)
Chapter 11: Strategic Leadership
The concepts of logistics
and supply chain
management (continued)
•
Logistics management is:
- Performance required to move and position inventory
throughout a supply chain (the value chain)
- Creating value by timing and positioning goods
- Integrating function that links, coordinates and
optimises the entire value chain as a continuous
process
•
Supply chain management adds
manufacturing and applied marketing
(practical sales) to logistics management.
Chapter 11: Strategic Leadership
The concepts of logistics
and supply chain
management (continued)
Chapter 11: Strategic Leadership
Analysing the definition of
logistics management
• Logistics management is a subset of
supply chain management.
• It includes the actions required to:
- prepare (plan);
- organise (implement); and
- execute (control) the activities of a firm when moving
materials or finished products to customers.
• Logistics management encompasses many of a firm’s strategic,
tactical and operational activities.
Chapter 11: Strategic Leadership
Analysing the definition of
logistics management
(continued)
• The optimal level of logistics expenditure occurs
where marginal expenditure (i.e. the expenditure
attributed to the last unit of output) equals
marginal revenue (i.e. the revenue attributable to
the last unit of output).
• An objective of logistics management is to be
efficient across the entire system.
Chapter 11: Strategic Leadership
Business logistics
activities
The flow of goods, services and information
between the point of origin and the point of
consumption or application involves the following
activities:
• Demand forecasting
• Site selection and facility design
• Procurement
• Materials handling
• Packaging
• Warehouse management
Chapter 11: Strategic Leadership
Business logistics
activities (continued)
• Inventory management
• Order processing
• Logistics communications
• Transport
• Reverse logistics
• Customer service
Chapter 11: Strategic Leadership